Note: Stanley Black & Decker and TTI do not seem to calculate their segment profits in the same manner, and as such these figures should not be directly compared in the same ways that overall revenue, segment revenue, and net earnings can be.

Stanley Black & Decker’s short-term plans involve working towards a more balanced portfolio aided by capital deployment, which would also see the addition of a distinct lawn & garden category in their revenue pie chart.

Recent business news remarked that Stanley Black & Decker is entering the lawn and garden product market for the first time, but that is incorrect, as they have previously marketed outdoor power tools under Black & Decker and Dewalt brands before purchasing the Craftsman brand or a partial share in MTD.

Stanley Black & Decker has a 20% stake in MTD Products and has the option to purchase remaining 80% beginning in 2021.

They also expect that the Craftsman brand will contribute ~$1B of revenue growth by 2021.

Stanley Black & Decker has also said, in their recent Investor Presentation, that they are continually considering acquisitive growth opportunities.

TTI, Techtronic Industries, owns Milwaukee Tool, Ryobi operations in North America and several other international regions, Empire Level, Homelite, and several other tool brands. Through a licensing agreement they also operate Ridgid cordless power tool products exclusively sold at Home Depot.

Compared to 2017, TTI earned 17% more revenue and 16.9% more profit in their tools and equipment segment.

TTI has also said that their Milwaukee Tool business has grown 28.2% worldwide over the previous period (2018 vs. 2017). We don’t know how much revenue Milwaukee Tool earns in relation to the total sum, but we do know that the popular professional power and hand tool brand is growing year over year.

Additional Discussion

I regularly examine Stanley Black & Decker’s financial information, with their investor releases and documents providing valuable insights into the performance and direction of the company. TTI is also a publicly-traded company, and so their financial information and business performance disclosures are also readily available.

Reviewing 2018 performance for both brands, I am extremely surprised at how far both companies have come, but especially how much TTI has grown.

During the years ended December 31, 2018 and 2017, the Group’s largest customer contributed total revenue of US$3,194,744,000 (2017: US$2,760,045,000), of which US$3,143,450,000 (2017: US$2,688,536,000) was under the Power Equipment segment and US$51,294,000 (2017: US$71,509,000) was under the Floor Care and Appliances segment. There is no other customer contributing more than 10% of total revenue.

TTI’s total revenue share for North America was $5.372B in 2018, which represents 76.% of the total.

I believe it is clear that The Home Depot is TTI’s largest customer, but objections to this opinion are of course welcome. In the the power equipment and tools segments, Home Depot distributes Milwaukee tools, Ryobi, Ridgid, Empire, and Hart. It is worth reminding the reader that Ryobi and Ridgid (power tools and equipment) are tool brands that are exclusively sold at Home Depot.

TTI’s largest customer contributed ~$3.2B of their ~$7.0B in total revenue in 2018, and ~$2.7B of their $6.0B in power equipment and tool revenue in the same period.

In the case of Lenox and Irwin, we moved aggressively to capture the revenue synergies from these transactions. We are focused on leveraging these products within our global customer base and bringing new offerings to market, particularly in emerging markets.

They discuss their largest customer as well:

One customer, Lowe’s, accounted for approximately 12% and 11% of the Company’s consolidated net sales in 2018 and 2017, respectively. No other customer exceeded 10% of consolidated sales in 2018, 2017 or 2016.

If I am interpreting TTI and Stanley Black & Decker’s statements correctly, it means that The Home Depot (which we presume is who TTI refers to as their largest customer) contributed ~$3.2B of TTI’s revenue in 2018, or about 46% (calculated), and Lowe’s contributed approximately 12% of Stanley Black & Decker’s revenue in 2018, or about $1.68B (calculated). If accurate, this would mean that Home Depot contributes nearly twice the revenue to TTI than Lowe’s does to Stanley Black & Decker.

Update: In their 2018 annual report, Stanley Black & Decker reported:

Sales to Lowe’s were approximately 17%, 16% and 15% of the Tools & Storage segment net sales in 2018, 2017 and 2016, respectively. Sales to The Home Depot were approximately 14%, 13%, and 14% of the Tools & Storage segment net sales in 2018, 2017 and 2016, respectively.

TTI does not provide a tools-segment-only revenue contribution of their largest customer.

It is interesting to note that Lowe’s contributed 17% of Stanley Black & Decker’s tools and storage segment revenue in 2018, and Home Depot 14%. Compared to total revenue, Lowe’s contribution is decreased to 12% overall, and Home Depot’s to less than 10%. It is interesting to note that Home Depot and Lowe’s combined contribute to ~31% of Stanley Black & Decker’s tools and storage revenue.

While the revenue contribution from Lowe’s increased from 15% in 2016 to 16% in 2017 and 17% in 2018, I would have anticipated a greater difference, given the volume of Craftsman tools that Stanley Black & Decker shipped to Lowes during the 2018 winter holiday shopping season, but it is difficult to interpret and infer about these matters without more information.

It will definitely be interesting to see what 2019 has in store for both companies and their growing tool brands.

40 Comments

I had to look at the numbers several times before I believed them. It’s potentially risky, but Home Depot’s Ryobi and Ridgid brands are very firmly intertwined with TTI, not to mention how huge of a brand Milwaukee is for them.

I think that, given TTI and Home Depot’s history and the strength of their relationship, there’s far less cause for concern than there would be with most other retailers.

Not when it’s the Home Depot. They run some of the best tool promotions, have excellent customer service, a functional website, fast shipping.

SBD banking on Lowe’s for the success of the Craftsman brand is a much much shakier proposition.

Lowe’s is an absolutely exhausting experience. From their barely functional website to their customer service/return policies. Just finding items and then getting Lowe’s to ship them is an absolute crapshoot.

Home Depot will ship anything they have in stock and they’ll ship it for free (2 days) if your order is over $45.

Lowe’s is the worst of the big 3 in all areas. I hold Menards and home Depot as separate but equel home improvement stores but power tool wise the Depot has 3 of the best.
Bye professional tradesman for 20 years Milwaukee is all we use on the job and I use the Ryobi line at home and am very pleased with it’s capabilities I mean who doesn’t love cordless bolt cutters

Everytime we go to click a function after not being on the Lowe’s website for all of 15min, results in bringing me to the bleeping log-in page everytime, no matter if I click ‘remember me.’
Sometime I just want to check availability, and in that respect, the Sears website is better.
The Lowe’s site also tends to have two listings of many products. The customer service says this is due to online & in-store inventory BS, though all the exact same. Very distracting trying to figure out whats different between two items aside from variations of model #, when there is nothing.
The 2nd issue may not be an issue anymore, as I shop a lot less through Lowe’s than once did, but the first drives me bonkers because it happens so much

Lowes can’t get out of its own way – lol. I don’t even bother with their website if I’m looking for anything ‘hardware’. It’s the worst in so many ways. Their ridiculous return policies lost them both my sons as customers. They are a terrible resource as very few sales staff know even a little something about hardware. At Home Depot there has always been someone who can give me advice. Even Depot’s customers have pitched in with suggestions! Lowes store brand is on par with Harbor Freight (imo). I could go on but there’s a reason why the pros go to Home Depot (aside from Milwaukee Tools) even when Lowes is closer. Lowes goes for the less educated retail sector while Home Depot gets the pros. While not one myself, I’d rather go where the pros shop for advice as well as products.

Lowe’s website and app are the absolute worst. Almost never accurate with their in stock numbers or location in store. And I shop Lowe’s 3-4 times a week. Also, impossible to find someone who’s actually knowledgable in any department there.

Lowes website is absolute garbage. Half the time the search feature wont show what i have to find manually, and sometimes their mobile site wont even display on my iphone. Not to mention if you walk into a lowes where I live (SoCal), good luck getting help. When i walk into home depot im greeted at the door and can get help without having to walk more than one isle away usually.

But how much stock in TTI do you think THD owns? Just like liberty hardware, peerless, etc…. THD is in the process of acquiring controlling interest in all their major suppliers. Watch the major lumber suppliers. I would wager a nice shiny dime that one of them will, if not already be majority controlled by Homer. Homer has a very large hand with extremely long fingers that are in everybody’s pie!!!

This is the biggest disparity I find. Makita batteries I’ve had just horrible luck with, I’ve seen guys very rapidly annihilate Ryobi and rigid batteries in a professional environment, I love Milwaukee’s overmolding and attention to their batteries, but I’ve smoked a handful of them and they seem to bleed way faster in a heated up tool, and Dewalt I’ve toasted 2 with my oldest being about 8 years old at this point Though the sticker and button on the battery guages seems to be a common failure point after a couple years, and I wish they had Milwaukee’s use of rubber.

I will take a Milwaukee over DeWalt any day! Milwaukee has really stepped up to the plate while DeWalt seemed to go cheap to try to price match. There are plenty of Pro’s out there who gladly still pay for quality! Thanks Milwaukee! Shame on you DeWalt!!!

Its a bit hard to draw conclusions from the numbers presented – and poring over their annual reports might be interesting – but even then not tell the whole picture.
When we would look at our own businesses – we’d try to evaluate not only gross and net profit margin but also things like liquidity ratios and ROIC (particularly looking at new investments in plant and machinery) year over year. We’d also pay attention to cash flow issues like aging of our accounts receivables.

BTW – TTI’s profit on revenue seems rather paltry – but I don’t know how much of their profit they plowed back into the business – or what their gross was versus their net. Both being investor owned companies – other measures that we might look at ( year over year) would be their debt to equity and other leverage ratios, and their earnings per share.

For SBD: Segment profits minus corporate overhead and other net costs and a loss “on sales of businesses” and also restructuring charges and asset impairments, plus interest income, minus interest expenses, and then minus taxes, and then you have overall profits.

It looks to me like TTI factors most business-related costs into determining their segment profits, but Stanley Black & Decker does not, but deducts them from combined segment profits.

As long as both brands maintain the same formulations year over year, there might not be a “right” way and a “wrong” way.

If you look at SBD’s earnings only before interest income, finance costs, and taxes, it’s lower than the $1.536 Billion described in their presentation.

Their 2018 annual report declares tools & storage profit of $1.393 Billion, and we don’t know how the corporate overhead, “other” expenses, business sales losses, or restructuring charges are applied to the different categories. Those expenses amount to $651 Million and are deducted from the summed segment profits.

I think it’s interesting that TTIs profit to revenue ratio is small compared to SBD. One hypothesis would be that they’re on a solid growth trajectory and are either a) providing highly affordable tools with a lower profit margin (e.g. Ryobi); b) investing heavily in R&D (as you alluded to with Milwaukee) or c) a combination of both.

TTI breaks down the costs, and I don’t quite understand the breakdown enough to explain why their profit share is proportionally lower. R&D costs are said to be ~$202M. Selling, distribution, and advertising costs are $1.103B. Revenue minus costs of sales comes out to a gross profit of $2.615B, and after all the expenses, profit is $595M before taxes, and $553M after.

SBD had gross profits (2018) of $4.851B, selling, general, and administrative costs of $3.172B, and net earnings of ~$606M after taxes.

Steak houses have chicken and salads. Even if a retailer might want to drive customers to a preferred brand or option, having some added variety beyond that is good for keeping customers and potential customers from taking their purchases to a competing retailer.

Home Depot has some special arrangements with Dewalt and other Stanley Black & Decker brands.

Anything that brings a customer in the door is better than not though. Grocery stores do loss leaders for the same reason, some things you take a hit on because it brings foot traffic in and you end up in the black.

I can’t handle these subjects, not for me, I never liked to work for a bank, or to be an accountant or economist, I was always good with mathematics and numbers, but when numbers carry a different value on them (money) I just hate numbers then and math goes to the shelf as my brain starts to boil and I feel deep headache. I don’t think money is everything, this mentality will bring the end of the world very soon.

I find the way these two view their brands and customers fascinating. I could not be further from a professional tool user, but in my personal life as a owner of a large amount of property, an interest in autos of yesteryear, and I guess a “maker” in my free time, I spend liberally mostly in the “professional – auto – industrial” categories.

I find it odd that Home Depot alone has the cream of the retail crop (Milwaukee at all and DeWalt Flexvolt) from both brands. Unsurprisingly, when isolating between the two retailers, 90% of my spending goes to HD.

I enthusiastically welcome SBD pushing harder into outdoor tools, hopefully in the DeWalt Flexvolt flavor. I would love to stop buying small carbureted engines in the era of E10+.

I think these posts are a lot of fun, and digging into this stuff will allow to see where the companies are going. Keep it up!

They still are the only big box retailer with Flexvolt. I know if I was needing a new DeWalt battery, and was silly enough to buy it at retail price in store, I’d be walking into HD for a Flexvolt not an antiquated 20v battery. But if you have only shopped at Lowe’s, you may not be familiar with more power tools
All Lowe’s has over HD on power tools is carrying Bosch tools in store, otherwise I find Lowe’s quite lacking. Veering off topic… oops

Oh I literally use Lowes specifically because their website (app) is by far easier to use than home depot or menards. It does not require specific input to find a product like the others and guides you directly to the product in store, home depot’ does as well after you wait forever for the app to load and decide if it wants you to log in again for the umpteenth time. I very much prefer Lowes and their fairly stringent hiring over the waste of space employees at home depot but I do still use both of them.

Milwaukee brand is superior to dewalts line up for power tools they are so good mechanics are now using them instead of their air tools the freedom of the cord or air line is a very awesome feeling even I’m thinking of selling my compressor. I can see why they value on a take over for just that brand alone. They probably figure why try to catch up to their product let’s just take them over and control majority of the market share of the tool segment.

Your comment on Milwaukee mechanics tools over air is interesting. I know lots of pro mechanics. Mechanics who back when Sears was still huge with USA Craftsman tools, would very seldom buy stuff from the Snap On guy. I have a friend who would always badger his coworkers about their entire paycheck going to pay the Snap On guy when Sears was literally across the street with USA tools. If he broke something, he could exchange it over his lunch hour, they’d have to wait till next month. In those days they all used air impacts. These days they’re using battery impacts. You know what they all use now? Not Mac or Snap On, they use Milwaukee impacts. Literally every one I know. These guys couldn’t do plumbing or construction to save their life, Milwaukee means nothing to them for that. But boy do they love their impacts.

If I hadn’t invested in V20 before I needed a new impact, I very well may be in the Milwaukee system today just for that. Right now I’m just waiting for something new from Craftsman. I’ve borrowed a couple of those M18 impacts and they are indeed fantastic. Small, compact, lightweight and seriously powerful! And I’m not a Milwaukee guy or anything. I can see why Milwaukee is making a push for mechanics hand tools now though. They’re trying to grab the business of the guys using their impacts for automotive work.

I was truly shocked when SBD launched Craftsman bringing in Joe Gibbs racing and having a Nascar vehicle set up so guys could use the new Craftsman impact to rip off lugs. That’s a pretty big deal… I was expecting some awesome new line of pro mechanics impacts or something. And then they came out with a re-branded Porter Cable which itself was a 10 year old DeWalt. Old, low power, heavy and Big. Very bizarre and a huge letdown. I kept wondering why they did that? Especially with all the mechanics that used (or used to use) Craftsman hand tools.

Does the higher get profit reflect lower costs or higher margins? Hard to say but I would think that if the lower and mid tier brands make up the bulk of revenue, SBDs profit margin must by definition be lower though total profit higher. They must be banking on Craftsman not only increasing market share vis a vis Lowe’s but also moving up existing customers to higher prices…the guy who would buy the Porter Cable buys a Craftsman.

The difference in profits seem to be more due to different calculation methodologies than different business practices. If you compare the net profits for the companies, SBD’s is $605M, and TTI’s is $553M. That’s a lot closer than ~$1.4B and ~$600M provides as the “tool segment” profits.

I know not all Lowes will be like this one but at my hometown Lowes I’ve actually had an employee look at their watch and walk away from me and all I did was ask where and item could be found. He never answered my question. Another time I was buying a 15″ drill press and the Lowes employee didn’t want to load it into my vehicle even though I’m walking with a cane. He tried to get me to buy the smaller bench top model and actually said because its smaller. To be fair, there is a lower level manager there that is great and will do all he can to help. Unfortunately I can tell you several more horror stories about this Lowes. That said at the next closest Lowes, they are always friendly and willing to help. I have no idea of why the local one is so full of employees who are useless.